Month: March 2012

Example of replication of a real object by means of 3D scanning and 3D printing. The gargoyle model on the left was digitally acquired by using a 3D scanner and the produced 3D data was processed using MeshLab. The resulting digital 3D model, shown in the screen of the laptop, was used by a rapid prototyping machine to create a real resin replica of original object. (Photo credit: Wikipedia)

The idea is to create a 3D dimension to make models and even parts for airplanes, car parts – available for most fabrication. Think of the advantage of printing a model instead of moving from design to models to manufacturing models in scale and then the final design and manufacturing.

The costs are already dramaticly lower as ” early adopters ” are using the technology. CSI used a 3D printer to make a model of a bullet.

PTX reported a clean quarter that was consistent with the pre-announced range that came with the business update in early March.

The path from here we think will be linked to execution across several fronts including:

(1) effective launch of new “GI product” in May leaves potential for it to be a leading portfolio product;

(2) ability to grow scripts for CEDAX and NATROBA (new nationwide point-of- Sale coupon) where focus is high; and importantly

(3) business development productivity which has been active and we see no slowdown.

Bottom line: risk/reward remains favorable with the 44% 3-year EPS CAGR most robust across our coverage and holding potential to move higher should we see more deal activity.modestly lowering EPS estimates in 2012 and 2013 (on higher spend), although outer years are largely unchanged.

We have given no explicit credit for Theobromine in our model, which we leave as upside pending better clarity on whether the asset is retained or divested.

Valuation

Our $15 price target is unchanged and based on an equal weighted ~22.0x P/E multiple and ~1 2.0x EV/EBITDA multiple applied to our forecasts twelve months from now, one year out. DCF adds further support assuming a ~14% WACC and – 5% terminal value.

RIM shares were up US88¢, or 6.4%, to US$14.61 at 1:09 p.m. ET in Nasdaq trading Friday.

In what was the first earnings call for Thorsten Heins, the company’s new CEO provided a does of reality for those who think RIM could be finding its feet.

JPMorgan analyst Rod Hall said he does like the fact that Mr. Heins appears to be taking a realistic and pragmatic approach to the company’s difficult situation as he makes senior manager changes and targets US$1-billion in cost savings by the end of fiscal 2013.

“BlackBerry 10 remains on track, but we continue to believe that the smartphone operating system war is over and RIM is one of the losers,” Mr. Hall said in a research note.

The analyst thinks RIM’s plans to rely on partnerships for consumer and content features makes much more sense than trying to develop a full-featured music, application and video platform on its own.

“We do see potential to leverage the company’s substantial messaging platform on both iOS and Android but this won’t replace lost device and profit share,” Mr. Hall said.

The analyst cut his price target on RIM shares to US$13 from US$14, while reducing his 2013 EPS estimate to US$1.65 from US$2.34.

The company also saw the first decline in international revenues (7% annually) in its history, which may heighten concerns that Apple Inc. and Android may consume RIM’s international leadership as has been the case in North America.

As a result, the time RIM has to execute a turnaround has been reduced, according to Mike Abramsky, analyst at RBC Capital Markets.

While Mr. Heins remains confident in the new BB10 operating system, Mr. Abramsky told clients that RIM continues to misread the market – both in terms of the bring-your-own device trend in the enterprise space, as well as the software and ecosystems of Apple and Google Inc. As a result, the analyst warned that RIM “may have lost too much momentum to recover.

He cut his price target on the stock to US$13 from US$16 and warned that it may remain volatile until visibility on BB10 improves or RIM’s true prospects as a takeover target emerge. Mr. Abramsky’s 2013 EPS estimate falls to US$1.95 from US$3.00.

With channel checks at Canaccord Genuity indicating deteriorating sales trends, analyst T. Michael Walkley also trimmed his already below-consensus earnings forecasts. His 2013 EPS outlook for RIM is now US$1.43, down from US$2.10, while he introduced a 2014 EPS forecast of US$1.19.

“With strong share gains for the iPhone 4S, increasingly price competitive Android smartphones, improving Windows smartphones, and strong initial sales trends for the new iPad, we anticipate increasing competition across all of RIM’s products,” the analyst said, reiterating a US$12 price target on the stock.

“We believe BB 10 smartphones will launch into an even more competitive smartphone market, as we anticipate continued innovative new Android LTE smartphones, an increase in Windows smartphone offerings from Nokia and other OEMs, and a refreshed LTE iPhone 5,” he added.

Fourth quarter handset shipments at RIM came in at 11.1 million, which marked a 26% year-over-year decline as an average selling price (ASP) of roughly $250 resulted in the revenue miss. National Bank Financial analyst Kris Thompson believes RIM will reduce its ASP to boost BB7 shipments ahead of the BB10 launch.

He also noted that BB7 smartphone writedowns are following the path of the PlayBook. RIM took a $267-million inventory provide to write-down high-end BB7 smartphones and the analyst expects more of the same leading up to BB10.

Mr. Thompson left his US$8 price target unchanged, but cut his 2013 EPS estimate to US$1.00 from US$1.37.

We maintain our BUY rating following mixed Q4/11 results, with revenue growth driven by Advanced Wound Care (AWC) with core products again stable. DSC127 is on track and expected to begin enrollment of its Phase III trial by YE/12.

CAVEAT

Management continues to execute on its strategy of building out its direct sales force and AWC product portfolio; however, its recent acquisition of MedEfficiency for $14.5M in cash may cause concern for investors as the company now has to create additional liquidity to fund its Phase III pivotal trial for DSC 127.

Highlights

Q4/11 results were mixed with revenues in line but LPS higher than our and consensus expectations. Sales were driven by AWC growing 23% Y/Y, while core products grew 3%, as expected.

The company acquired MedEfficiency, an advanced wound care company, for $14.5M in an all-cash transaction (~3x 2011 revenues). •

DeeThree Exploration announced Alberta Bakken and Belly River flow test results along with increasing its 2012 guidance and capex budget.

In the Alberta Bakken, the company reported IP30 rates at the company’s previously announced Bakken discovery well on its Lethbridge property of 415 bbls/d of oil with an average water cut of 3%.

The second Bakken well drilled by the company in 2012 was drilled to a planned total horizontal length of 1,440 meters and was successfully fracture stimulated with 180 tonnes of sand over 18 stages using an energized water based system. After stimulation, this well has been flowing for approximately three days with a current flow rate of approximately 800 bbls/day oil with a water cut of 3%.

DTX also announced IP30 rates at its Belly River well of 480 boe/d (83% oil and NGL’s). The company drilled and completed 3 gross (2.8 net) Belly River oil wells in the first quarter of 2012 with a fourth well currently drilling.

All three wells drilled year to date have recently come on-stream with results exceeding internal type curve expectations highlighted by the last well which tested at a stabilized rate of 450 boe/d (75% oil and NGLs) after a seven day test.

Due to the success of the company’s Bakken drilling program the Board of Directors has approved an increase to the 2012 capital expenditures budget from $57 million to $82 million. As a result, 2012 exit production is expected to increase from the previously announced 4,300 boe/d (61% oil and NGLs) to approximately 5,000 boe/d (70% oil and NGLs). Year end debt levels are expected to be approximately $46 million on projected fourth quarter cash flow of approximately $14 million.

With the recent run up in oil prices and wide heavy oil differentials, many have raised questions of late around how to be defensive within the Seniors/Integrated space.

Caution : this sentiment provides further near-term risk to the sector and thus warrants a look at how the stocks reacted historically (he includes the oil sands stocks as well). A driving factor to investors’ concern on oil, besides hitting the psychological triple digit crude price range, is that the net length in Brent and WTI futures/options are close to the all time high reached a year ago.

Some investors are also using last year’s oil prices as a key data point (although there is a view that economy wise, we are in a relatively different territory). To that end, WTI and Brent have been trading at ~US$110/Bbl and US$125/Bbl, respectively. This is in line with the last peaks reached in early April 2011 of ~US$113/Bbl and US$127/Bbl.

Note WTI and Brent subsequently declined by 33% and 19%, respectively, through October 4, 2011.

Also of note –The stocks peaked about a month before oil did during this time (and this may have recently happened again). During this aforementioned period of decline, among the Seniors/Integrateds, the outperformers were

Cenovus Energy (CVE) and

Husky Energy (HSE)

, which fell 16% and 26%, respectively, as each of these were viewed as key defensive stocks.

With some exception to CVE, have not been outperformers YTD, which potentially provides the view that these are again safety nets. On the other hand,

Among the Seniors/Integrateds :Nexen (NXY) and SU have the largest downside risk, and these two are the best performers YTD. Among the Oil Sands/Heavy Oil companies, CLL and STP are the most sensitive.

In contrast, Athabasca (ATH) is the least. Note that the stocks are pricing in $86.00/Bbl WTI oil on average, or roughly 20% below the spot,

There may be limited torque left in the stocks once oil prices hit triple digits, which is likely recognized by the recent questions we have been receiving by investors.

Commodity Pricing March 30

Crude oil: $102.78, down $2.63 (3%) Thursday May NYMEX crude oil fell $2.63 to $102.78 while May Brent declined $1.77 to $122.39. Since peaking on March 13 at $126.22, Brent has declined 3%. WTI peaked earlier, at $109.77 on February 24 and is off 6% since that time.

This morning, May Brent is up ~$0.75 while May WTI is ~$0.50 higher as S&P futures have rebounded 0.5%.

Natural gas: $2.15, down $0.13 Thursday

May NYMEX gas plunged $0.13 to $2.15 while Henry Hub lost $0.02 to average $2.01. NYMEX prices plunged after a bearish injection.

Looking forward, we are afraid the cash price will act as a magnet, pulling futures toward $2. This morning, May gas is flat after an encouraging US production report.

Other States output surged ~0.35 Bcfpd while New Mexico increased 0.1 Bcfpd and Louisiana fell ~0.15 Bcfpd. Interestingly, Wyoming output was flattish after declining 0.2 Bcfpd the prior month supposedly in large part due to a compressor station fire.

We expected gas production to rise 0.6 Bcfpd sequentially, or 0.4 Bcfpd excluding Wyoming. While production shutins do muddy the waters a bit, the data suggests summer production growth could be close to nil, slightly less than our prior expectation for less than 0.1 Bcfpd of sequential growth.